Mercedes 2009 Annual Report Download - page 187

Consolidated Financial Statements |Notes to Consolidated Financial Statements |183
Sales in which the Group guarantees the minimum resale value
of the product, such as sales to certain rental car company cus-
tomers, are accounted for similar to an operating lease. The
guarantee of the resale value may take the form of an obligation
by Daimler to pay any deficiency between the proceeds the
customer receives upon resale in an auction and the guaranteed
amount, or an obligation to reacquire the vehicle after a certain
period of time at a set price. Gains or losses from the resale of
these vehicles are included in gross profit.
Revenue from operating leases is recognized on a straight-line
basis over the lease term. Among the assets subject to “Operat-
ing Leases” there are Group products, which are purchased by
Daimler Financial Services from independent third-party dealers
and leased to customers. After revenue recognition from the
sale of the vehicles to independent third-party dealers, these vehi-
cles create further revenue from leasing and remarketing as a
result of lease contracts entered into. The Group estimates, that
the revenue recognized following the sale of vehicles to dealers
equals approximately the additions to leased assets at Daimler
Financial Services. Additions to leased assets at Daimler Finan-
cial Services were approximately €4 billion in 2009 (2008: approxi-
mately €5 billion).
Research and non-capitalized development costs. Expendi-
ture for research and development that does not meet the condi-
tions for capitalization according to IAS 38 Intangible Assets is
expensed as incurred.
Borrowing costs. Borrowing costs are expensed as incurred,
unless they are directly attributable to the acquisition, construc-
tion or production of a qualifying asset and therefore form part
of the cost of that asset.
Government grants. Government grants related to assets are
deducted in calculating the carrying amount of the asset and
are recognized in profit or loss over the life of a depreciable asset
as a reduced depreciation expense.
Interest income (expense), net. Interest income (expense), net
includes interest expense from liabilities, interest income from
investments in securities, cash and cash equivalents as well as
interest and changes in fair values related to interest rate hedg-
ing activities. Income and expense resulting from the allocation
of premiums and discounts is also included. Furthermore,
the interest component from pensions and similar obligations is
disclosed under this line item.
An exception to the afore mentioned principles is made for
Daimler Financial Services. In this case the interest income and
expense and the result from derivative financial instruments are
disclosed under revenue and cost of sales, respectively.
Other financial income (expense), net. Other financial income
(expense), net includes income and expense from financial trans-
actions which are not included under interest income (expense),
net, e.g. expense from the compounding of interest on
provi-
sions for
other risks.
Gains and losses resulting from the issuance of shares by a
Group subsidiary to third parties that reduces Daimler’s percent-
age ownership (“dilution gains and losses”) and Daimler’s share
of any dilution gains and losses reported by its investees account-
ed for under the equity method are recognized in other financial
income (expense), net, or in share of profit (loss) from companies
accounted for using the equity method, net.
Income taxes. Current income taxes are determined based on
respective local taxable income of the period and tax rules. In
addition, current income taxes include adjustments for uncertain
tax payments or tax refunds for periods not yet assessed as well
as interest expense and penalties on the underpayment of taxes.
Deferred tax is included in income tax expense (benefit) and
reflects the changes in deferred tax assets and liabilities except
for changes recognized directly in equity.
Deferred tax assets or liabilities are determined based on tempo-
rary differences between financial reporting and the tax basis
of assets and liabilities including differences from consolidation,
loss carryforwards and tax credits. Measurement takes place
on the basis of the tax rates whose effectiveness is expected for
the period in which an asset is realized or a liability is settled.
For this purpose, the tax rates and tax rules are used which have
been enacted or substantively enacted at the balance sheet
date. Deferred tax assets are recognized to the extent that tax-
able profit at the level of the relevant tax authority will be avail-
able for the utilization of the deductible temporary differences.
Daimler recognizes a valuation allowance for deferred tax
assets when it is unlikely that a respective amount of future
taxable profit will be available or when Daimler no longer has
control over the tax advantage.
Tax benefits resulting from uncertain income tax positions are
recognized at the best estimate of the tax amount expected
to be paid.
Discontinued operations. The operating activities of Chrysler
including the related financial services business in North America
until August 3, 2007, the result from the deconsolidation of the
Chrysler activities and adjustments of this result are presented
as discontinued operations in the Group’s statement of income
(loss) (see Note 2).